What Is A Locked-In RSP?

What is a locked in RSP
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The Registered Retirement Savings Plan (RRSP) is a popular choice for many Canadians who’re saving for their future. Other than regular RRSP, you may have also come across a “Locked-In RSP” or LIRA. This article explains what a LIRA is, how it differs from a traditional RRSP, and why it can be excellent for those seeking long-term retirement security.

What is a Locked-in RSP?

A locked-in RSP, also known as a Locked-in Retirement Account (LIRA), is a specialized form of retirement savings account that is usually used by many of your work pension funds. When leaving an employer with a pension plan, you may be able to transfer the accumulated pension funds into a locked-in RSP. These funds are “locked-in” to ensure that they are used exclusively for retirement and cannot be withdrawn before a certain age, typically 65.

Differences between a Locked-in RSP and RRSP

While both a locked-in RSP and a regular RRSP aim to provide retirement income, there are significant distinctions between the two. Flexibility and accessibility are the primary differentiating factors.

1. Withdrawal restrictions

With a traditional RRSP, funds can be withdrawn at any time, but are subject to taxation. A locked-in RSP, on the other hand, is subject to provincial or territorial pension legislation, and the funds are “locked-in” until a specific age, usually 65, or under certain circumstances, such as financial hardship or disability.

2. Transferability

Once you reach the age of retirement, you can transfer your funds between different financial institutions and convert them to a Life Income Fund (LIF) or a Locked-in Retirement Income Fund (LRIF). When transferred, you can withdraw a certain percentage from this account as part of your retirement income. This reduces the risk of you outliving your retirement funds.

3. Investment options

A locked-in RSP typically offers the same investment options as RRSP and TFSA. Your investment portfolio will depend on your risk tolerance and financial objectives, you can select from various asset classes, including equities, bonds, mutual funds, ETFs and more.

Benefits of a Locked-in RSP

A locked-in RSP can provide several benefits:

  • By transferring your pension funds into a locked-in RSP, you can assure the preservation of your retirement assets. These funds remain undisturbed until retirement, protecting them from impetuous purchases and financial emergencies.
  • A locked-in RSP is intended to provide a stable income throughout retirement. Converting the funds to a LIF or LRIF permits periodic withdrawals while preserving a balance that can continue to grow through investments.
  • Similar to a traditional RRSP, a locked-in RRSP gives you the flexibility to select your preferred investment strategy based on your risk tolerance and goals. You can potentially achieve long-term growth by diversifying your portfolio and adjusting your asset allocation as your situation changes.


The benefits of a locked-in RRSP include the preservation of retirement resources, protection from creditors, and the possibility of tax deferral. It ensures that the funds remain dedicated to retirement purposes, providing long-term financial security.

You can start withdrawing from your locked in RRSP  when you reach retirement age, typically between 55 and 65 years old. However, the specific withdrawal regulations for a locked-in RRSP vary by jurisdiction.

To withdraw money from your locked-in retirement account, you must typically adhere to the rules established by the administrator of your pension or retirement plan. This may involve submitting a withdrawal request and providing the required documentation to demonstrate withdrawal eligibility.

A locked-in retirement account is set up to store pension funds transferred from an employer-sponsored pension plan. It operates under specific regulations and restrictions, ensuring that the funds remain dedicated to retirement and providing a constant stream of income during retirement.

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Written by:

Jim Pan, CFP, MFA-P

Jim is a dedicated, fee and advice only independent Certified Financial Planner with a focus on supporting healthcare business owners during their crucial growth phase. His expertise lies in offering comprehensive solutions to minimize taxes while embracing a holistic approach. With a career spanning back to 2010, Jim has established a strong presence in the financial industry. He proudly holds a range of designations, including Certified Financial Planner (CFP), and Master Financial Advisor - Philanthropy (MFA-P). He is currently pursuing additional designations and qualifications to better serve his clients and community. Beyond his qualifications, Jim is a member and an esteemed participant in the Million Dollar Round Table (MDRT), an exclusive global association comprising the top 1% of financial advisors. Jim's commitment extends to the community, where he spearheads numerous charitable fundraising events and plays an active role in enhancing the well-being of others. Additionally, he has contributed significantly by serving on the board of the Canadian Mental Health Association in Vancouver. Currently, he volunteers with Junior Achievement of British Columbia (JABC) to present personal finance topics to youths.

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